Five Retirement Planning Mistakes to Avoid

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9.6.24: this mp3 audio file was automatically transcribed by Sonix with the best speech-to-text algorithms. This transcript may contain errors.

Speaker1:
Any examples used are for illustrative purposes only, and do not take into account your particular investment objectives, financial situation or needs and may not be suitable for all investors. It is not intended to predict the performance of any specific investment, and is not a solicitation or recommendation of any investment strategy.

Speaker2:
Welcome to Money Matters with Mike, with your host, Mike Zeno. Get set for a full hour of financial information and economic news affecting your bottom line. Mike works hard each day to educate Americans like you on how to reach the financial freedom they've worked so hard for. And he can help you too. So now let's start the show. Here's Mike Zeno.

Speaker3:
All right, what's up people? Welcome to Money Matters with Mike at a new time and a new late show, we have decided to kind of revamp and revitalize the show, eliminating some of the fluff and just giving you straight meat on the bone. And as always, I am joined by the one and only my co-host and producer extraordinaire, Mr. Matt McClure. Matt, how are you doing today, brother? I'm doing great.

Speaker1:
Mike I hope you are as well. I'm excited for the new time slot here and the kind of new format a little bit. It's it's an exciting brand new day for Money Matters with Mike.

Speaker3:
It is. Every once in a while we gotta switch things up. And, you know, just I have found that people's attention spans are not as long these days as perhaps they once used to be. So I think if we just give them a lightning bolt packed full of information that might spark them to actually, you know, look out for themselves, uh, our goal is to shake them a little, rattle them a little, and get them to start watching out for themselves. And of course, I'm talking to each and every single one of our listeners who listen to us, uh, live on the radio at Re, as well as all of those listeners who listen to us globally on our podcast anywhere that you might receive a podcast. Money matters with Mike.

Speaker1:
Yeah, that's right. Just go to those podcast apps, whichever one is your favorite, and search. Money matters with Mike. You can also go to Money Matters with mike.com. That's the website to go to for all of the past episodes of the show. Yeah, they'll all be the the hour long version of the show up until this very one. But a lot of great information and insights into how you can have a more successful retirement and how Mike Zeno can help you along the way also. Youtube. Go to the YouTube channel or just go to youtube.com or open the app there. Search for Money Matters with Mike. Same deal on the socials, right? Mike? I mean, you just search for Money Matters with Mike on, say, Facebook for example, and you can interact with the one and only Mr. Mike Zeno.

Speaker3:
Absolutely. We love answering questions on Facebook. We get a lot of private, uh, direct messages on Facebook. So if you ever want to reach out that way, you can. And as always, you can just pick up a phone and call me literally when you dial (704) 560-1573 it rings my cell phone. I do that for a reason. I can't stand when I call companies and have to press one to speak English, and then get stuck in a quagmire of automation for what seems like an eternity before I finally get to a human. If you contact me, if I can answer the phone, I will. And if not, you leave me a message and I'll get back to you as soon as I'm able. And of course, you can always text me, which does seem to be the fastest method of getting Ahold of me. (704) 560-1573.

Speaker1:
A lot of great stuff to come up on this half hour edition of Money Matters with Mike. We got some common mistakes that people make in their retirement to discuss, among some, among some other things here, Mike is, as far as you know, how much risk are you taking with your retirement? And we'll talk about some compound interest. And as a matter of fact, it's it's funny that I say that now because we've got a quote of the week, a very famous one here to share from Albert Einstein. And it's about that very thing. So let's get right into it, shall we, with our quote of the week.

Speaker4:
And now for some financial wisdom. It's time for the quote of the week.

Speaker1:
And as promised, this week's quote does come from the one and only Albert Einstein. A pretty smart guy, I would say. And he said, this compound interest is the eighth wonder of the world. He who understands it earns it. He who doesn't pays it. And boy, if you understand that that that is just so, so powerful.

Speaker3:
It is. And, you know, we've gone into this in such great detail in previous Money Matters with Mike episodes, and it is so true, and I don't think it could be illustrated any better than just the time value of money.

Speaker2:
Hungry for something to chew on? Here's some meat on the bone.

Speaker3:
I always like to give an example where if you start at 25 years of age and you invest $1,000 per year, okay, for five years, and then never put another penny into your investment account, and then I instead wait ten years until I'm 35 and invest $1,000 every year for the rest of my life until I reach 65. So I have invested for 30 years. Right? And you have invested for five because you got a ten year head start. Assuming we both earned the exact same compound rate of return, I won't catch you. Even though I put in six times the money that you did. So if that doesn't illustrate the power of compound interest. Matt, I don't know what does.

Speaker1:
That's very true. It it is a very powerful thing. As Albert Einstein says, they're the eighth wonder of the world. And, you know, if you on the flip side of that, let's say you've got a credit card that's got a very high interest rate and you are carrying a balance on that each and every month. Well, that interest compounds and works against you. I mean, it just gets added on to that balance each and every month. And then the next month you're paying interest on top of the interest and then interest on top of interest again. And so it's just like a snowball and it can be a very positive thing, or it can be a very as I was just alluding to their negative thing as well.

Speaker3:
Yeah. You have to make sure that if you are a user of plastic, that you pay off at least your statement balance each and every single month, because doing that will eliminate any of that compound interest that gets added to your balance at the end of that month. So, I mean, especially with credit card interest rates as high as they are right now, I think legally they can go up to 30.99%, which is absolutely ludicrous. And we're going to discuss more about compound interest later in the show.

Speaker1:
Yeah we will. We've got a lot of great detail to come up about that. And of course, you know, not paying off those balances every month. At least that statement balance on that credit card every month could be a big mistake, as you just alluded to. And now, when it comes specifically to our retirement planning, which is a lot of what we focus on here on the show, we wanted to discuss five mistakes that we really want people to avoid when it comes to their retirement plans. Mike. And the first one is putting off saving for retirement. Don't delay. Start today.

Speaker3:
Yeah, this is so true, Matt. So many times I talk to people who are in their 20s and even their 30s and sometimes 40s, who are like, Mike, I just can't afford to save for retirement. And I'm thinking to myself, wow. Um, yes, you can, because if you show me your credit card statements and your bank statements, what I'll do is I'll show you where your priorities lie, okay? And that tells me that you haven't prioritized paying yourself first. So if you can get in the habit of paying yourself first, it amazes me how much extra money you find to get those, uh, bills paid by their due date. But if you wait and pay those bills, it also amazes me how there never seems to be enough money to pay yourself because you're putting yourself last in that list of priorities. Okay? Americans are in trouble when it comes to saving for retirement. Millions of older workers are approaching their golden years. All right. With absolutely nothing saved, which is a tragedy in and of itself, Matt. So if you're listening and you maybe have skimped on saving for retirement this year, now that we're in September, it's understandable, especially given a volatile economy. But it is a mistake, and it's a mistake that you must fix as soon as humanly possible. Fortunately, writing this wrong, Matt, is entirely doable for our listeners. Yeah.

Speaker1:
That's right. I mean, you know, people might think, you know, Mike, it's it's too late. I've been, you know, putting it off for so long. But really, there are ways that you can catch up and make up for that lost time. You might not have as much time on your side now, but you can implement strategies and help folks implement strategies in their plan, right? That can actually help them be in a much better place than they would be otherwise.

Speaker3:
Yeah, I mean, the first step is, is is recognizing that you have a problem. It's kind of like the first step to AA, right? Acknowledging you have a problem. And I'm just doing that because I've heard it before. I'm, you know, I have a lot of good friends that are now sober. But, you know, the first step is, is realizing that, you know what? I have a problem that I need to fix. And then if you're looking for ways to be able to fix your problem, I don't care if you make 30 grand a year, 40 grand a year, or 400 grand a year. All right. I've met 40,000 ers who are buttoned up financially, and I've met millionaires who are basically broke and living paycheck to paycheck because they're spending everything that comes in. And, you know, no matter which situation you find yourself in, I've got a solution for you. And all you got to do is pick up a phone and give me a call. All right? Either that or go to the website Money Matters with Mike and fill out a, you know, schedule a consultation, 100% complimentary and no obligation consultation just to see how I can help.

Speaker1:
Yeah. And that number, if you want to call is (704) 560-1573. (704) 560-1573. Our number two mistake that we want you to avoid when it comes to planning for retirement. And this one I know you're big on. Mike is not building an emergency fund.

Speaker3:
Yeah, Matt, we talk about emergency funds, uh, very often on the show. And it's because the majority of people in America are living paycheck to paycheck, which is a staggering and sobering statistic. Right. But the importance of an actual emergency fund cannot be overstated. Okay. And just like with retirement savings, many Americans are behind here as well. Okay. Most Americans, in fact, would not be able to cover an unexpected expense of only $1,000. Okay, again, it's not really their fault, all right. But they need to try to remedy this, as it will only get more dire as the years go by. All right. Our financial education system is broken in America, and that is mainly the reason that we do the show to arm folks with this information that they can take and apply to their lives and put themselves in an ultimately much better position than those who don't seek the knowledge. Okay. As years go by, though, the chances of unexpected expenses increase. Matt. Which means that you want to have at least 6 to 12 months, and I really prefer 9 to 12 months. Or heck, let's just call it 12 months of an emergency fund so that no matter what life throws at you, you got it covered. And you know what, folks? When you have a year's worth of your living expenses sitting in an account that you don't touch. You kind of don't worry about the little things as much. You walk a little taller, your shoulders roll back a little bit more. Because no matter, like I said, what life throws at you, you have the ability to take that head on.

Speaker1:
And you cannot, as we often say, put a price on peace of mind and that will give you a lot of it there. If you have that big emergency fund built for yourself, just just as as that cushion that you need in case something does happen. The number three mistake here is selling investments. When markets swing as we say it. You know Mike don't try and time the market.

Speaker3:
Yeah. No I mean people freak out. And the bottom line is that most investors are are guided by emotion and not logic and not the understanding of how markets actually work. Right. Markets are cyclical, which means they will go up and they will go down and they will go up and they will go down. But over time. And that's the key component. Over time, the market has always gone up. Okay. Yes. This year, um, the stock markets got off to a rocky start, you know, but it is definitely stabilized somewhat. And if you made reflexive reactions to the market volatility, especially what, a couple weeks ago when between a Friday and a Monday, I think the market lost about 6%. I know a lot of folks who went, ah, you know, and they they moved into safe havens at that point in time, not understanding that the market will come back. And those folks, unfortunately, by the end of that next week, the market had gained everything that it had lost. So the people who freaked out, in essence, they locked in their loss and did not participate in the upswing. Right? So those folks absolutely missed out on profits and they can, believe it or not, repair that mistake.

Speaker1:
Yeah, and that's 100% right. You know, Mike, one of the things that you mentioned, there is a lot of people may have pulled out of their investments and put that money into some safe havens somewhere. One of those places might have been under the mattress or something like that. Um, but, you know, I mean, that that actually leads us directly into this next mistake that we want you to avoid, which is staying in cash.

Speaker3:
Yeah. So I talked to a lot of folks a lot all the time. Like, not even a lot of the time. All the time. Right. Who are stashing their earnings and they're putting them in, you know, vehicles like checking or savings account, uh, maybe a money market account, maybe a CD, which, you know, before this year, we've really we've always, you know, called those certificates of depreciation or certificates of death, um, because they just haven't earned very much over the history of the last decade or so, or what's worse, you know, at home, under the mattress and in literal cash. I talked to a gentleman not too long ago who asked me to handle some some of his money, and he brought in a suitcase with with a whole bunch of money. We'll just put it that way. A whole six figures worth of cash, um, that he had. And I'm like, how long have you had this in this suitcase? And he's probably, he said, probably 20 years. And I'm thinking to myself, wow, you lost out on 20 years worth of market growth. I mean, that is a tragedy in and of itself. So open up your mind, folks, to making your cash work harder by investing some of it.

Speaker1:
Yeah, it's not working at all if it's just sitting in a suitcase or under the mattress or in a safe at home or whatever it might be. You know, you got to put that money you've worked so hard for it over the years. You want it to work as hard for you now. And that's part of, you know, paying yourself first, right? Investing in your future, self and future you will. Thank you so, so much for that. And I know somebody, by the way, who can help you along this route. And that is a good segue into the last mistake that we want you to make, because that guy's name is Mike Zeno. He happens to be the host of Money Matters with Mike. I don't know if it's a little radio show and podcast. I don't know if you've heard about it, but this mistake is going it alone. Definitely not what you want to do.

Speaker3:
Yeah. You know, I don't know exactly when the topic of money became taboo, right? I know that there are families who never discuss money, and what they're actually doing is setting up their children and their descendants, right, for financial failure. I understand that money can be perceived as a deeply personal topic, but it really should not be. Not only is it wise for us to engage in fruitful dialogue about our financial lives, but we should also be proactive and enlist the guidance of financial professionals, if especially if we want to make the best choices and implement the best strategies. All right. Financial professionals do this day in and day out as their job, as their career choice. And you know what? The majority of them are experts in their field. If you do something every single day and you encount encounter countless different situations, then you know how to, uh, counsel a myriad of problems when it comes to people who have just different types of financial issues. So again, we want to offer every single one of our listeners a risk free analysis, a consultation to help you understand the current risks that you're taking with your investments, to show you how your investments are all working together. And as always, like I stated before, there is no obligation and you are free. You are free to receive the information and use it as you wish.

Speaker1:
And all you have to do to get started in that adventure and and a positive experience I'm sure will be going to Money Matters with Mike comm. That's Money Matters with Mike comm and you can schedule a consultation there. You could also call Mike once again (704) 560-1573. That's (704) 560-1573. All right Mike, we're going to you know, one of the things that we that we talk about quite a bit on the show obviously is risk. You just mentioned it there with, you know, offering people and risk analysis of their current plan or if they if they don't have a plan getting them a plan. But let's talk about one particular kind of risk here and let people know, you know, there is a way to know how much risk you're taking as far as this goes. Sequence of returns. Risk. Talk about kind of just defining that for us and why. Sequence of returns risk is so important to know about.

Speaker3:
Yeah I mean just think of it this way. I mean, as you age, the less risk you can afford to take or you should take just simply because if you're planning on using that money for retirement to fund activities to so that you can actually enjoy your golden year years and then fund just the normal day to day life, you have to be very, very cognizant, which means aware of this particular type of risk that is called sequence of returns risk. And that is the risk that retirees, as well as Pre-retirees face when they experience poor investment, returns early on in their retirement years, which can lead to a depletion of their portfolio and significantly affect their ability to sustain their desired lifestyle throughout retirement.

Speaker1:
Yeah, and it's huge. I mean, the impact on all of those different things is, you know, and we say, you know, don't don't try and time the market, obviously. But timing really can be very crucial when it comes to the impact of sequence of returns risk as you as you just alluded to there. You know, because you don't want these big losses early in your retirement years while you're also drawing down on those investments. And I mean that talk about just the impact on on the portfolio itself early in retirement. If you don't have a plan that accounts for sequence of returns risk.

Speaker3:
Yeah, I think you just let the cat out of the bag, right. The portfolio's value could be significantly reduced because, all right, if the market is going down and your portfolio value is is is decreasing, and you are also withdrawing Drawing funds to cover things like your mortgage payment, your groceries, your taxes, just your day to day living expenses. And you're taking that from a shrinking portfolio that only exacerbates the problem, as the funds that are remaining in your account have less potential to recover when the markets eventually do improve. And that can absolutely have long term consequences as well. Matt, because a depleted portfolio early on in retirement can lead to a likelihood, a greater likelihood of you running out of money later on in life, which is the number one fear for most people in retirement, is outliving their money. And that's especially if the market doesn't recover quickly enough. So I always like to highlight, you know, the Great Recession, what happened in 2008. Can you imagine somebody who retired in 2007 and then boom immediately 2008, you know. The markets lost almost half.

Speaker3:
Okay. And then boom, in 2009 they lost again. And it wasn't until later on in 2010 that it, you know, picked back up and started a ten year bull run. So that person experienced negative returns in three consecutive years. Now let's flip that with somebody who retired at the end of 2010 and then saw the best bull run in the history of the market. Right. So the person a who who experienced three negative returns in in those three consecutive years, that person's money would never last as long as the person who retired at the end of 2010 and saw that long, long bull market. So, you know, that can force retirees to make drastic changes to their lifestyle or take unnecessary risks with their portfolio to try to double down and get back what they, you know, lost, which is pure speculation at that point. And then it also causes them to rely more heavily on other income sources like Social Security, which may or may not be there in its same format, you know, after 2035 or so. And you don't.

Speaker1:
Want to be in a situation where you are relying on Social Security as the sole source of income, right? I mean, you are going to be in a situation that you want to be in when that is just the cherry on top and not something that you are relying on in retirement. And talk about how, you know, this is, you know, really non-reversible a non-reversible situation for retirees.

Speaker3:
Yeah. So, Matt, unlike individuals in who are in their working years, who continue to contribute to their retirement accounts during those market downturns, well, guess what? Retirees usually don't have the ability to replenish their portfolio. Once they start drawing from it. So understanding the impact of sequence of returns risk is absolutely paramount for a successful retirement. And so, you know, like I said, if you don't if you want to dive deeper into that, just pick up a phone, go to the website. Uh, whatever you got to do, send a carrier pigeon, but schedule your complimentary consultation.

Speaker1:
Pony express, whatever you have to do there. Uh, just call Mike at (704) 560-1573. You can also go to Money Matters with mike.com. All right. So as promised here we're going to do a little bit of more talk before we close out the show this week on compound Interest. Now we touched on the really the power of compound interest. Compound interest, I should say. And the risk of compound interest kind of both sides of that coin. Um, talk also about this this kind of recent survey here, Mike, that found, um, something interesting when it comes to how far along people are in their sort of retirement planning journey. Yeah.

Speaker3:
That survey found that only 37% of Non-retired Americans are either what they consider on schedule or even ahead of schedule, which means that what 63% are behind. Okay. And considering that more than half of Americans say they're behind on their retirement savings, it can feel impossible to get ahead. But those who feel good about their retirement savings. Um, 42% of those cite that contributions made early in life as the number one factor for building up their retirement wealth. And that's followed, of course, by low debt. Uh, having equity in their home, great savings habit, as well as employer sponsored retirement accounts and then earning good income. So I don't care where you are. It is never too early. It is never too late. And it is never too often to boost your retirement savings. Guys, you only get one shot at retirement, okay? And you have the choice on how you want to live it. Do you want to live it at the same lifestyle that you were living when you were working? Or do you want to take a significant hit to how you're going to be able to enjoy life? Well, I think most of you are saying, hey, I'd rather do the first one right. I'd rather keep on keeping on, basically, and make the same or more money retired as I was when I was working. Well, if that's you, you absolutely have to put a plan together to get yourself to that point.

Speaker1:
Yeah, and a plan that can help you take advantage of compound interest while you've still got time on your side. A plan that can set you up with a personal pension in retirement so you don't have to worry nearly as much about that sequence of returns risk that we were talking about a little earlier in the show as well. I know a guy who can help you get started along that road. It's Mike Zeno. Money matters with mike.com is the website once again. Well, Mike, this show, of course, the very first half hour edition of Money Matters with Mike has just come and gone so, so quickly this week. It feels like we just started. Now we're wrapping up. But hey, I love it. We crammed a lot of great stuff in here and a lot of wonderful information for our listeners, so we'll do it again next time. Sir.

Speaker3:
Matt, thanks for everything you bring to this show. No doubt about it. It is not the same when you are not here, but most importantly from the bottom of our hearts. I just want to thank every single one of our listeners. Without you, we don't have a show. So if you got anything from this show that you think is valuable information, please share it on the socials. Invite people to listen, you know, subscribe to our Facebook and YouTube channels and whatever you're doing this weekend. I hope you enjoy it to its fullest extent and as always, make it a great day.

Speaker2:
Thanks for listening to Money Matters with Mike. You deserve to work with a licensed financial and insurance professional who can offer strategies for protecting and growing your hard earned money. To schedule your free, no obligation consultation, visit Money Matters with mike.com or pick up the phone and call 704560 1573. That's (704) 560-1573. Not affiliated with the United States government. Mike Zeno does not offer tax, legal or investment advice. Consult with your tax advisor or attorney regarding specific situations. Opinions expressed are subject to change without notice. These opinions are not intended as investment advice, nor do they predict future performance of any product. All information provided is believed to be from reliable sources. However, we make no representation or warranty as to the accuracy of any statement. This information is intended to be educational in nature and does not provide a guarantee or a specific result. All copyrights and trademarks are the property of their respective owners. Amara Life assumes no responsibility or liability for the content of this message. The information contained herein is provided on an as is basis with no guarantees of completeness, accuracy, usefulness, timeliness, or the results obtained from the use of this information. Nationwide's peak ten fixed indexed annuity is designed to help protect and grow your savings to generate income you can never outlive. Peak ten also has an optional rider that offers an immediate 20% bonus based on your principal. Apply to your income benefit base. Call us now at 704 5601573. That's 704 5601573. Guarantees and protections referenced within are subject to the claims paying ability of nationwide life and annuity insurance company nationwide. Peak ten is issued by Nationwide Life and Annuity Insurance Company. Columbus, Ohio.

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